NSEL Case : Did FMC go overboard in its role as the Regulator?

After reading Shantanu Guha Ray’s book ‘The Target’, one area of huge concern that one needs to scrutinize in the NSEL case is of regulation. The Forward Markets Commission, which regulates the commodity exchanges in India, disowned the regulation of NSEL saying that it is not under its purview, while the Department of Consumer Affairs through various notifications entrusted the FMC with regulation of spot exchanges and oversight which are core issues that form any regulatory mandate. Three important regulatory terms were used in these letters, entrusting the responsibility to the Forward Markets Commission: “providing oversight”, “safeguarding investor interest”, “submitting information on a fortnightly basis”. Globally, these three words form the bulk of the regulation in any market but is rather strange why FMC chose not to fulfill these functions entrusted to it.

Assuming for a moment that the FMC is not responsible for spot market business, then why was it so keen on punishing the promoters of NSEL for payment defaults that took place in the private market. In fact, some of the government committees set up initially to investigate the issue observed that the affected parties were few and niche and this crisis. In that case what could be the motivation for the FMC to take such exceptional and extraordinary interest in this issue?

To know more about FMC’s role in the NSEL Crisis, read the book ‘The Target’ by Shantanu Guha Ray.

Reference: Shantanu Guha Ray: (2016): ‘The Target Book’: New Delhi: Publisher: AuthorsUpFront

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